11/09/2009 @ 4:00PM

Tech Stocks Still Moving

It’s been a rough market in technology over the past week or so, with many leading technology companies posting terrific earnings and failing to retain stock gains.
Intel
kicked off the technology earnings season, beating consensus estimates of earnings by $0.05, revenues by $400 million and gross margins by 300 basis points. The stock is down since earnings. Sandisk beat earnings estimates by $0.49 and expanded gross margins to 46.6% vs. expectations of 31.3%. Even
Apple
, which came in $0.40 above expectations and beat every metric, was trading at $189.86 before it announced its earnings and has been on a tear since.

Yet, the poor short-term movements for technology stocks generally ignore the real data supporting the Mobile Internet Technology cycle, and represent buying opportunities in the sector. Here are just some of the interesting figures out this week.

Marvell increased its guidance for the quarter by 19%–21% from $680–$730 million in revenues to $760-$770 million based on improved demand in its end-markets. On its earnings call this past quarter, Marvell had cited mobility as the biggest driver in its business for the upcoming quarter growing at a greater than 20% rate. We would deduce from the increase in guidance that wireless is continuing to soar.

Synaptics
, maker of touch pads and touch screens for notebooks and handsets, just reported its highest September quarter in history and beat consensus by $0.06. Mobile, which comprises 38% of Synaptics’ overall revenue, grew at a 60% year-over-year clip this quarter and revenue from mobile phones grew 64%. Management stated that only 10% of the cellphone market, to date, has touch screens, indicating that their potential growth in mobile will continue to ramp. They announced eight new design wins, evidencing more smart phone devices coming to market from various manufacturers.

Some of the most interesting data points this week came from the wireless carriers. “We are seeing a data explosion that we have never seen, at least in my history, in wireless,” stated
AT&T
Mobility and Consumer Market CEO Ralph De La Vega. Across AT&T Wireless,
Verizon
and
Sprint
, all three carriers cited strong growth emanating from smart phones and mobile data.

AT&T attracted 2 million new subscribers, bringing their total subscriber base to 81.6 million. They achieved their seventh straight increase in Average Revenue per User (ARPU) of $61.23, driven by data usage. Data ARPU increased to $18.37, representing a 25% growth over the year ago period and wireless data revenue increased by 34%. AT&T added 4.3 million integrated devices (QWERTY or touch screen devices) and, today, 41.7% of AT&T’s post-paid subscriber base has an integrated device.

The story is similar at Verizon. Net subscriber additions totaled 1.2 million, bringing Verizon’s total subscriber base to 89 million. Data revenue was a big driver here as well with a 29% growth rate over a year ago, and increasing to 30% of total revenues, vs. 25% a year ago. PDAs and smart phones comprised a significant 40% of device sales this quarter and now make up 23% of devices in their subscriber base. Verizon continues to focus on integrated devices and stated its commitment to “maximize” smart device introductions in the fourth quarter this year. ARPU at Verizon increased to $51.04, and data ARPU also increased by 17% to $15.59. Non-messaging revenue increased by 34%, compared with an increase of 22% for messaging revenue.

While Sprint is losing subscribers, its bright spot is also revenue generated by integrating devices. Over one-third of Sprint’s gross subscriber additions are coming from smart devices, and the percentage is increasing each quarter. This is driving Sprint’s ARPU and data ARPU, which is $56 and $19, respectively. Sprint boasts the highest data ARPU of its competitors and has been steadily increasing the data ARPU each quarter, up 19% from $16 a year ago.

The message is clear and consistent among the carriers: Wireless data revenue is becoming a larger percentage of overall revenue and is driving up the subscriber ARPU, the key industry metric. Integrated smart phones are driving data usage and becoming an ever-increasing percentage of the connected-device landscape. Within data usage, messaging is taking a backseat to Internet connectivity, also driving data revenue. In order for the carriers to try to capture more of this increasing pie, they are scrambling to bring more smart devices to market. AT&T continues to make the greatest impact with one offering as 3.2 million
Apple
iPhones were activated in the quarter of 4.3 million smart devices added to the network.

At a time when investors are concerned about finding growth, all the data is pointing at substantial double-digit, 20%, 30%, 60%, growth rates in mobility. Mobility continues to be the shinning star in the economy, delivering real revenue and earnings growth, without artificial stimulants to create demand. People need and want great connectivity all the time because it increases productivity and makes them smarter and more competitively positioned. Plus it’s fun and social. The drivers and catalysts for the Mobile Internet cycle persist, and when the market ignores the fundamentals to take a breather, investors can take advantage of the dips.